Supplier evaluation represents one of the most critical analyses in a company to remain competitive, especially in times like now when markets are changing very fast. Following are the important steps for Supplier Evaluation.
- Define Requirements – Suppliers’ evaluation takes place on several Key Performance Indicators. So first step in supplier evaluation is to decide the metrics for the evaluation purpose. The selection of these metrics can vary depending upon the type of business and the suppliers.
- Develop Questions for Potential Candidates – Create a questionnaire for suppliers to access their ability to address business requirements. Although each situation is unique, usually for deciding the questionnaire following points can be considered:
i) Company Management
ii) Sustainability
iii) Product/Process Design
iv) Operational Excellence
v) Continuous Improvement
vi) Costs - Combine and Assess Supplier Capabilities – After documenting the business requirements and receiving a response for standard questionnaires from suppliers, the next step is to engage with potential suppliers and gauge their level of interest in partnering. Supplier’s capabilities can be assets further by requesting samples or prototypes.
- Compare and Identify Top Pick – After the initial assessment of each supplier, top candidates get shortlisted. A numeric rating system to apply to each Key Performance Indicator can be helpful to compare the top-performing suppliers with each other. The comparison can be as simple as the below table.
- Comprehensive Audit – After identifying top suppliers, the next step is to plan and conduct a thorough audit for these top-performing suppliers. The result of this audit will finally determine the acceptance or rejection of a supplier.
- Performance Monitoring – Continuous monitoring of suppliers is a crucial contributor to the success of any business. It helps to maintain the required standards for the products and services. A strategic schedule of periodic audits can be effective for evaluating the performance of suppliers regularly.
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